1. Field of the Invention
The present invention relates to a system and method for providing an issuing party of a structured securities transaction with a vehicle by which performance data of one or more underlying assets of the transaction may be communicated to one or more investors, potential investors, or other interested parties.
2. Related Art
The selling and buying parties to a structured securities transaction (or deal as is known in the art) are the issuer (or originator) and one or more investors. There are many types of securities which may be issued in a structured transaction, such as asset-backed securities, mortgage-backed securities, etc.
In an asset-backed security transaction, the issuer sells one or more corporate obligations (often in the form of a fixed income security) which are securitized by a pool of assets. The one or more investors purchase the corporate debt obligation(s) with the understanding that the underlying pool of assets (such as accounts receivable, loans, etc.) affect their income from the security.
In mortgage-backed securities transactions, the corporate debt obligations are secured by a pool of mortgages.
Issuers of structured financial securities are those entities who generate financial assets in the normal course of their business. Such issuers include, but are not limited to, banks, thrifts, mortgage companies, manufacturers and distributors with a financing division, retailers with credit card or other finance operations, consumer finance companies, specialty finance companies, equipment lessors, asset aggregators, or any other business enterprise that generates substantial quantities of trade receivables.
Investors include, but are not limited to, insurance companies, banks, thrifts, mutual funds, and private investors. Other interested parties include rating agencies, monoline insurers, research firms, investment banks, and accounting firms.
A structured security transaction is structured in accordance with one or more documents, such as a Pooling and Servicing Agreement, a primary document that governs the transaction, including the roles of a trustee, service provider (known as a “servicer”), and bond issuer. The trustee is hired by the issuer to represent the investors and, in the structured finance context, is typically one out of four or five large financial institutions (e.g., Chase Manhattan Bank). The servicer is often the issuer or originator of the asset, but sometimes is a third party.
Investors are often interested in the performance of the underlying assets securitizing the corporate debt obligations because it could affect the timing and amount of income received on the security or the ability to be repaid the principal of the security. The Pooling and Servicing Agreement will typically provide that the trustee and/or servicer prepare periodic monthly reports concerning the status of the underlying pools of assets. For example, when a pool of assets comprises a number of loans which underlie a security, the trustee, servicer, or other party may be bound to provide status to the investors on the underlying loans. The status may include, for example, principal collected, interest collected, foreclosures, prepayments, losses, delinquencies, whether trigger thresholds have been reached, etc.
The reports on the status of the underlying assets are typically prepared on a monthly basis and transmitted to the investors via, for example, facsimile transmission or may be posted on an electronic billboard (such as on the internet).
Unfortunately, these conventional reports prepared by the trustee and/or servicer in accordance with the Pooling and Services Agreement, have several disadvantages. In particular, these reports provide status on the underlying assets for only one point in time (i.e., during the relevant month). Thus, the investor is not provided with historical information on the performance of the underlying assets, for example, a time series of interest collected on the loan assets. Indeed, the static “snap shot” of data provided in these reports does not provide the investors with information as to performance trends of the underlying assets which may be utilized by the inventors, for example, to determine whether the security should be held or sold.
Another disadvantage is that the conventional reports are only available to the investors who are parties to the deal. A potential investor (i.e., an investor who has not yet purchased an asset-backed or mortgage-backed security from the issuer) cannot readily obtain the reports from the trustee and/or service provider. Thus, the issuer cannot easily use the performance data relating to past deals to persuade a potential investor to purchase securities in a new deal.
Further, each report provided by the trustee and/or servicer relates to only one deal. It is not possible, therefore, for these reports to provide information as to the performance of a portfolio of underlying assets from more than one deal. For example, if an investor were interested in the asset performance of all assets originated by issuer X in the same year, then those assets would likely securitize obligations related to more than one deal. The conventional reports, therefore, would not provide the investor with the information he desires.
Another disadvantage of the conventional reports provided by the trustee and/or servicer is that they contain only that information which is scripted by the indenture document (i.e., the Pooling and Servicing Agreement). Thus, the issuer is not provided with an opportunity to explain or interpret the status of the underlying assets, particularly explanations relating to performance trends which would affect whether an investor continues to hold the obligations he has purchased or whether a potential investor would purchase securities in a new deal from that issuer.
Still further, as the conventional reports provided by the trustee or servicer are presented to the investors via facsimile and/or contain status information for only a one month period, an investor, potential investor, or other interested party cannot easily download historical information regarding performance trends of the underlying assets for use, for example, on his own computer.
A system by Bloomberg provides information regarding the status of underlying assets of particular deals over a proprietary network to persons subscribing to the network. The information is substantially similar to the information provided in conventional reports from the trustee and/or service provider and is stored in a cumulative fashion which allows for viewing the information in a graphical format which displays trends over periods of time.
Unfortunately, the prior art methods and/or systems do not adequately address the needs in the art for a method and system for producing asset performance reports which: (i) provide historical information on the performance of the underlying assets, for example, time series data and performance trends (not merely static, point-in-time information for one month); (ii) are made readily and freely available to potential investors, and other interested parties; (iii) provide aggregate information as to the performance of a portfolio of underlying assets, where the portfolio contains aggregated assets from more than one deal (e.g., asset performance of all assets originated by an issuer in one year); (iv) provide information beyond that which is scripted by the indenture document (e.g., explanations or interpretations regarding the performance of the underlying assets, particularly explanations relating to performance trends); and (v) are available for electronically downloading to an investor, potential investor, or other interested party.